Workers' Compensation:

Action Needed to Reduce Payment Errors in SSA Disability and Other Programs

GAO-01-367: Published: May 4, 2001. Publicly Released: May 4, 2001.

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This report discusses how workers' compensation (WC) benefits affect benefit programs run by the Social Security Administration (SSA) and other agencies. GAO (1) examines the effects of WC benefits on SSA programs, focusing on SSA's progress in administering the WC offset provision; (2) discusses other federal programs whose benefit payments are also affected by WC benefits; and (3) discusses ways to address federal benefit payment errors related to workers' compensation. GAO found that SSA's administration of the WC offset provision continues to be undermined by the lack of reliable information on WC benefits received by Social Security Disability Insurance (DI) beneficiaries which causes some beneficiaries to be overpaid and others to be underpaid. No national reporting system identifies WC beneficiaries. Instead, SSA largely relies on applicants and beneficiaries to report their receipt of WC benefits and any changes that occur in the benefit amounts--an approach that makes it very difficult for SSA to make accurate benefit payments. Other federal agencies also need WC information to make accurate benefit payments and face similar difficulties identifying WC beneficiaries. Like SSA, Medicare relies on its applicants and beneficiaries to self-report WC benefits and is vulnerable to payment errors when they do not. In addition, food stamp programs and Section 8 rental housing assistance consider WC benefits as income or assets, and an inability to obtain benefit information could affect the accuracy of benefit payments. There are ways to address the difficulty of reliably identifying WC beneficiaries. However, the fragmented structure of WC programs and the lack of federal involvement in state WC programs defy a simple solution.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matter for Congressional Consideration

    Matter: If SSA is unable to establish a viable voluntary WC beneficiary reporting process with WC insurers, Congress should consider establishing a periodic reporting requirement that provides the federal government with information that identifies WC beneficiaries. This information should be reported by WC insurers to a single federal agency authorized to use those data for its own administrative purposes and to share the information with other agencies needing it to meet their statutory obligations. Any system that is established should include features to prevent improper disclosure of that information and should restrict access to authorized purposes only.

    Status: Closed - Implemented

    Comments: This recommendation has been implemented because SSA is currently pursuing strategies to improve voluntary reporting with WC insurers from a prominent WC trade association that would provide the federal government with information to identify WC beneficiaries. SSA and the Congress share responsibility for ensuring accurate federal benefit payments.

    Recommendations for Executive Action

    Recommendation: The Commissioner of Social Security should ensure that SSA revises its policies and procedures governing the establishment of monthly benefit amounts stated in settlements for lump-sum payments. At a minimum, the regulations should require that estimates of the monthly benefit amounts consider the time value of money and the minimum payment amounts under state law. In addition, the appropriate amortization period for determining the monthly benefit amount should be consistent with benefit payment requirements under state WC program rules.

    Agency Affected: Social Security Administration

    Status: Closed - Implemented

    Comments: SSA recognizes the need to standardize the current policy and procedures for prorating workers' compensation (WC) lump-sum settlements in all jurisdictions. The Office of Disability and Income Security Programs (ODISP) has sought input from the regions and is discussing the issue to determine the viability of revising its policies and procedures regarding the methodology of prorating lump-sum payments. ODISP obtained input from the Office of the General Counsel in April 2003, and prepared a draft decision paper outlining the issues. ODISP staff are currently working with the Office of the Chief Actuary (OACT) regarding GAO's recommendation on the issue of time value of money as it relates to the proration of WC lump-sum settlements. After ODISP receives OACT's input, ODISP will be submitting the decision paper to the Deputy Commissioner for approval.

    Recommendation: The Commissioner of Social Security should ensure that SSA officials meet with representatives from the WC insurance industry to determine whether a viable voluntary reporting process can be established that would provide the government with information that periodically identifies WC beneficiaries.

    Agency Affected: Social Security Administration

    Status: Closed - Implemented

    Comments: The International Association of Industrial Accident Boards and Commissions (IAIABC) is an organization of Workers' Compensation (WC) professionals consisting of government regulators, business and labor leaders, law firms, insurance carriers, etc. At its October 2001 conference, IAIABC and SSA held a joint session and IAIABC agreed to research and develop two reports on what WC benefit information is available in each state's databases, and to identify the largest WC insurers. SSA intends to use this information as leads in contacting states, state agencies, and insurers to enhance electronic verification of WC benefits. The goal is to develop a standard agreement and promote the electronic sharing of information. SSA informed GAO in June 2003, that IAIABC has sent the fact-finding reports to SSA.

    Recommendation: To improve current operations related to WC information needs, the Commissioner of Social Security and the Administrator of the Health Care Financing Administration should test the extent to which sharing information that identifies persons who are or may be receiving WC benefits improves the accuracy of their benefit payments. If sharing this type of information is cost effective, further tests to similarly evaluate the costs and benefits of sharing WC information with other federal agencies needing WC information should be conducted.

    Agency Affected: Social Security Administration

    Status: Closed - Implemented

    Comments: GAO's report noted that Centers for Medicare and Medicaid Services (CMS) was vulnerable to payment errors because (1) the agency did not know in many cases who was receiving benefits from both the Medicare and Workers Compensation programs, and (2) the agency did not participate in lump sum settlements, which made Medicare vulnerable to overpayments because CMS was unaware that WC is supposed to pay for the medical expenses. As GAO recommended, a meeting was held between representatives of the CMS and SSA to discuss such a data exchange. The agencies found, however, that their need for data on work related injuries differed. Alternatively, CMS has placed a renewed emphasis on state data exchanges of WC information, and has participated in lump sum settlements to protect Medicare's interests. The International Association of Industrial Accident Boards and Commissions, a trade group composed of state WC experts, attorneys, and insurers credited this action, in part, to GAO's report.

    Recommendation: To improve current operations related to WC information needs, the Commissioner of Social Security and the Administrator of the Health Care Financing Administration should test the extent to which sharing information that identifies persons who are or may be receiving WC benefits improves the accuracy of their benefit payments. If sharing this type of information is cost effective, further tests to similarly evaluate the costs and benefits of sharing WC information with other federal agencies needing WC information should be conducted.

    Agency Affected: Department of Health and Human Services: Health Care Financing Administration

    Status: Closed - Implemented

    Comments: A meeting was held between representatives of the Health Care Financing Administration, now the Centers for Medicare and Medicaid Services (CMS), and the Social Security Administration (SSA) to discuss such a data exchange. However, at a joint meeting between SSA and CMS, discussions revealed that the CMS data files contained very little WC information that would be useful to SSA. While the data contained an indication of WC involvement, it contained no payment or provider information. As a result, SSA has placed a renewed emphasis on state data exchanges of Workers Compensation (WC) information. In 2001, the agency awarded a grant to an industry organization (representing insurance companies and workers compensation organizations) for the purpose of educating state WC agencies on the benefits and ease of electronic record sharing with SSA. They are also piloting an electronic exchange of data with seven states.

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